Cape Wind isn't aiming at wholesale market

Tuesday

Jan 27, 2009 at 2:10 AM

After reading William E. Griswold's Jan. 8 My View, "The true cost of Cape Wind electricity," my question is, so what is the true cost of Cape Wind's electricity? It is not the wholesale market. Simply rehashing the "bid zero" strategy is not what Cape Wind will do.

After reading William E. Griswold's Jan. 8 My View, "The true cost of Cape Wind electricity," my question is, so what is the true cost of Cape Wind's electricity? It is not the wholesale market. Simply rehashing the "bid zero" strategy is not what Cape Wind will do.

I have been associated with the utility business as a financial expert for 45 years. While Mr. Griswold presented the "cost" of fossil power plants on a cents per kilowatt-hour (kWh) basis, he failed to present the cost of offshore wind farms, the central issue of his piece. While it would be easy to bid 0 cents in order to receive the higher market clearing price, this would not represent the true cost.

The all-in cost of offshore wind farms in Europe is well known at more than 20 cents per kWh, perhaps 25 cents. Note this is about double the other forms of generation. At such a high price Cape Wind will need more subsidies and/or a power purchase agreement (PPA) to lock in a price sufficient to pay its financing and operating costs. Without a PPA Cape Wind will not receive financing. With a PPA, Cape Wind will not be able to "bid zero" into the wholesale market.